Govt's ‘fight against inflation’ promotes transfer of funds to capitalists

Turkish Minister of Treasury and Finance announced a new program including "all-out war on inflation" on October 9, 2018. "We wanted a minimum of 10 percent discount from all our companies and we reached a consensus," Treasury and Finance Minister Berat Albayrak said

Treasury and Finance Minister Berat Albayrak has announced the government's new "anti-inflation program" to the public with a meeting that Turkey’s big capitalist associations such as the Turkish Industrialists’ and Businessmen’s Association (TÜSİAD), the Independent Industrialists and Businessmen’s Association (MÜSİAD), and the Union of Chambers and Commodity Exchanges of Turkey (TOBB) participated as "contributors". The policies to be introduced with the new program indicate that the Turkish government’s "fight against inflation" will promote the transfer of funds to big capitalists in Turkey.

The new program provides that loan interest rate, which is one of the most significant factors in price increases and high inflation after the rise in exchange rates and oil prices, will be cut by 10 percent. It seems that the cost of this interest rate cut and comprehensive mechanism for the restructuring of financial debts will be substantially undertaken by the state via particular ways such as regulations by the Banking Regulation and Supervision Agency (BRSA) and the role of public banks in the process. In addition to these, the Turkish government aims to bring price increases under control by transferring public funds to big capitalists through particular incentives such as investment allowances and employment support.

CONSENSUS AMONG CAPITALISTS

Participants at the meeting took the floor before the Turkish Treasury and Finance Minister Berat Albayrak.

Hüseyin Aydın, the Chairman of the Banks Association of Turkey, stated: "We will continue to provide funds for the financing of the Turkish economy and we’ll contribute to carrying out nominal interest rates at lower rates."

Underlining that the inflation spiral is a big threat to the targets of their companies, Abdurrahman Kaan, the Chairman of MÜSİAD, also said that "Inflation is not only an economic phenomenon alone; it also harms our social codes. It is not just money that lost its value. Labor, determination for production, encouragement for investment and hope for the future also began to lose their meanings. For this reason, ‘all-out war on inflation program’ is a call for support. Now it is time to sacrifice our own wealth. MÜSİAD is ready to do the full share of work."

Erol Bilecik, the President of TÜSİAD, noted that "the government’s anti-inflation program is one of the most important attempt to overcome these hard times," saying that TÜSİAD is also ready to take responsibility to in this issue.

'WE'VE LAUNCHED A FINANCIAL SUPPORT PROGRAMME'

"Turkish government has launched a financial support programme to lower the price increases," Mustafa Varank, the Minister of Industry and Technology, stated at the same meeting on October 9.

Varank noted that the government will offer up to 14 percent financing support to enterprises for their Turkish lira-based loans, adding that under three different Small and Medium Industry Development Organization (KOSGEB) programs, they will offer almost 25 percent of incentives for 1 billion liras or more of machinery and equipment investments.

Saying that KOSGEB is a very important institution in the fight against inflation, Varank stated that the repayment of KOSGEB loans would be postponed for the next three months.

"NOBODY EXPECTED SUCH HIGH INFLATION RATE"

The Minister of Treasury and Finance, Berat Albayrak, who held the floor after the participants, stated: "Turkey has faced with speculative attacks against directly its currency by August. Later, our government started an active struggle against these attacks with the economy administration and strong collaboration with its partners. The attacks were repelled in September. With the program we’ll announce today, we will carry the investor confidence a step forward."

Saying that the inflation rate in September exceeded the expectations and nobody had expected such high inflation, Albayrak claimed that Turkey is now in a period of normalization.

ANTI-INFLATION LOGO TO BE USED BY STORES

"In our meetings, we have been warmly supported by the business world. We have agreed that all our companies will make a minimum 10 percent discount until the end of the year. This is a volunteer program. All the companies who participated in this struggle vowed to apply a minimum of 10 percent reduction by using specified [anti-inflation] logo," he stated.

Underlining that "We will adorn our stores, shopping malls with that logo. It includes all goods in the inflation basket," Albayrak said that the government asks from the citizens to prefer stores having these anti-inflation logos.

Albayrak also claimed that there will be no price rise in electricity and natural gas until the end of the year.

"We will give support to our businesses in order to prevent any rise in the number of redundancies," Albayrak said.

The financial data issued by the Turkish Statistical Institute (TurkStat) last week had indicated that the Consumer Price Index (CPI), which was estimated to be 20,8 percent in "the New Economic Program" announced by the Turkish AKP government by the end of 2018, had reached the record high in Turkey by 24,52 percent, despite the fact that the CPI increase had been estimated as 13,4 percent in the Third Quarter Inflation Report of the Central Bank of Turkey published on July 31, 2018, while the Domestic Producer Price Index (D-PPI) has also increased to 46,15 percent.